Paramount to buy Dreamworks

Dreamworks, the film studio co-founded a decade ago by Steven Spielberg, is about to be sold to rival Hollywood film-maker Paramount Pictures, according to weekend reports.

Paramount, owned by the Viacom media conglomerate, is said to be paying $1.5bn (£850m) in a mixture of cash and assumed debt. It was able to strike a deal after sale talks between Dreamworks and General Electric-owned NBC Universal, which had dragged on for months, finally collapsed.

Dreamworks has enjoyed a run of highly acclaimed releases, such as Saving Private Ryan, and boasts a back catalogue of about 60 films. It has struggled recently, however, following a series of flops such as The Island, released this year.

The company is separate from Dreamworks Animation, the maker of computer-generated smash hits such as Shrek, which is separately listed on Wall Street. There is still an important distribution deal in place between the two film businesses, which Paramount will now inherit.

Viacom is soon to be split in two, demerging its Paramount film and MTV cable television businesses from its more mature broadcasting divisions, including TV network CBS and the Infinity radio franchise.

The Wall Street Journal said a deal had been "forged" on Friday, while other reports suggested Paramount would bring in institutional money to foot part of the bill. These indicated that about two thirds of the total cost would be met by new outside investors.

Dreamworks entered exclusive talks with NBC earlier this year, but discussions broke down in September - partly because of NBC's worries about Spielberg's future commitment to the studio. Meanwhile, NBC and Paramount this year decided to abandon their long-running international distribution joint venture, UIP. Both have since been racing to establish a new international network.

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